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The End of Extreme Poverty in the Developed World

Extreme Poverty was only eliminated in the developed world relatively recently, around 50 years ago, having only begun falling dramatically from around 1850. This illustrates that progress in the fight against poverty can occur quite rapidly.

For the whole of human history prior to 1850, more than four-fifths of the world’s population lived on less than $1.25 a day. Today less than 15% of the world’s population live in extreme poverty and it is projected to potentially fall below 5% by 2030.

Background

Extreme poverty was the common experience for most of human history until recent generations (see here for more information about the Beginning of the End of Extreme Poverty). Former World Bank Economist, Martin Ravallion, has estimated the historic reduction in the number of people living below $1.25 a day in the developed world using data on income and inequality. While it is difficult to be exact, he provides the best insight available into historical trends in poverty reduction, which are shown in the chart below.

It was not too long ago that developed countries had similar rates of extreme poverty to what developing countries have today. For example, in the late-19th century, the United States had a similar rate of extreme poverty to what India has today, while at that time the United Kingdom had a similar extreme poverty rate to Ghana today. Another example is that over three-quarters of the populations of Australia, Canada and New Zealand were in extreme poverty 200 years ago, which is on par with the poorest countries in the world today, like the Central African Republic. However extreme poverty reduced to around 5% of their populations by 1915 and was eliminated by around 1950.

Significant progress against extreme poverty began in the 1800s and by the mid 20th century it was completely eliminated. The relatively recent elimination of extreme poverty in the developed world provides hope that rapid progress can occur and that it is feasible that one day soon the world could be free from extreme poverty.